Is there a correlation between what cryptocurrencies are mentioned on Twitter and their market prices, so as to make predictions?
On Bitinfocharts.com it is possible to compare two charts for different cryptocurrencies, one related to the number of mentions on Twitter per day and the other related to the dollar price of the token.
For example, the chart of Bitcoin’s daily Twitter mentions over the last 2 months reveals that there were only two big spikes: one in late June 2019, and a huge one on February 2nd, 2020. A third more contained peak occurred on April 2nd, 2019.
Comparing this curve with the price in dollars of Bitcoin in the last 12 months, there seems to be no close correlation between the two curves.
However, the first two peaks in Twitter mentions, those of 2019, occurred at the same time as significant price increases, and this is hardly a coincidence.
However, the sensational peak of February 2nd, 2020 does not correspond to a significant price increase, and this is because that peak was actually generated by the launch of Bitcoin’s new emoji on Twitter.
Hence, considering these data, not only is it not possible to use the number of Bitcoin mentions on Twitter to predict the price, since the peaks of mentions are often simultaneous and not prior to price increases, but they can even be misleading if they are caused by factors that are not at all related to BTC’s fluctuations in the market.
Only by extending the comparison to past years, i.e. from the beginning of 2017 to the present, the two curves begin to look a little more similar, but probably their link is exactly the opposite of what would be useful for making predictions.
In fact, it is probably the price growth that generates more mentions on Twitter and not vice versa.
A very similar thing can also be seen for Ethereum, while for example for Ripple (XRP) the price drop in recent years has not matched the mentions on Twitter, which have remained stable.
Differing results are obtained when comparing trading volumes on the markets with the number of daily mentions, both because the degree of correlation is much higher, and especially because in general the increases in volumes in the past have occurred after the increase in mentions.
So in this specific case, it is possible to use the daily chart of mentions on Twitter of the main cryptocurrencies to try to predict possible increases in trading volumes on the markets the next day.
It is worth saying that Twitter is now becoming a real reference point among social networks as far as the crypto sector is concerned, so it is not surprising that there are correlations between the number of mentions of the main cryptocurrencies on this platform and some other more technical metrics that concern them.
For example, Twitter’s co-founder and CEO Jack Dorsey is becoming a reference figure for the entire crypto industry, with the result that this is one of the few platforms that isn’t creating a lot of problems for crypto initiatives.
In addition, it is even thought that the same platform may in the not too distant future integrate bitcoin payments, perhaps through Lightning Network, as a subsidiary of the same group, Square Crypto, is working hard on this very front.
So the link between Twitter and cryptocurrencies could become closer and closer in the future, although for now, it is not yet possible to actually use the analysis of daily mentions of cryptocurrencies to predict price fluctuations.